After historic lows, inflation expected to tick up in Pakistan
Following a 0.3% YoY reading in April, Pakistan's headline inflation is expected to inch up to 2.7% in May, as per a report by brokerage house JS Global.
Pakistan's headline inflation clocked in at 0.3% on a year-on-year basis in April 2025, a reading below that of March 2025 when it stood at 0.7%, showed Pakistan Bureau of Statistics (PBS) data.
'Pakistan's Consumer Price Index (CPI) is expected to clock in at 2.7% for May. The base effect is now fading, signalling a return to normalised price trends. This is likely to take 11MFY25 average inflation to 4.7%, down from 11MFY24 average of 24.9%,' said JS Global.
It may be noted that the inflation reading in Pakistan rose to a record 38% on a year-on-year basis in May 2023, the highest level since data was made available beginning in July 1965.
As per JS Global, food inflation for May is expected to rise 1.4% on a YoY basis, which was -0.2% last year, owing to the dissipation of the base effect.
'Housing, gas and electricity are projected to post a 3.3% YoY decline and a 2% MoM decrease in May-2025, primarily due to a reduction in electricity tariffs during the month.'
Meanwhile, core inflation is expected to clock in around 9% YoY in April.
On policy rate, the brokerage house noted that the State Bank of Pakistan (SBP) reduced the key interest rate by 100bps to 11% in the last Monetary Policy Committee (MPC) meeting, mainly influenced by declining inflation.
This marked the seventh rate cut in the ongoing monetary easing cycle, bringing the cumulative reduction to 1,100bps from its peak of 22%.
'We believe that based on the lower-than-expected inflation readings thus far, a further cut in rates cannot be ruled out,' the brokerage house said.
The central bank is scheduled to meet on 16th June 2025 for its next MPC meeting.
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